Raising Maintenance Fees for Non-Practiced Inventions

Post-grant patent maintenance fees offer an easy mechanism for shifting patentee behavior. In the US, patent holders must pay a maintenance fee three times during the life of an issued patent. I think of the fee as akin to property tax. When a real-property owner fails to pay the property taxes, the state forecloses. In the patent system failure to pay the maintenance fees similarly results in the property right be taken from the non-payer. However, instead of reselling the patent at auction, the government instead announces that the previously patented invention is no longer protected by any exclusive right, i.e., that the patent right has been abandoned.

Patent rights are usually thought of as normal goods in that a higher price typically leads to a lower quantity demanded. In the maintenance fee context, higher maintenance fees lead to more patents being abandoned. And, most patents go abandoned by the time that the third-maintenance fee rolls around because patent holders decide that the extra payment is not worth the extra money.

In a recent draft article titled Removing the Troll from the Thicket: The Case for Enhancing Patent Maintenance Fees in Relation to the Size of a Patent Owner’s Non-Practiced Patent Portfolio, Professor David Olson (BC) focuses on maintenance fees as a mechanism for going after entities with large patent portfolios that are not being practiced. Olson writes:

It is proposed that patent maintenance fees be increased according to a sliding scale tied to the number of non-practiced patents a patent owner has in its portfolio. Thus, as the size of a firm’s patent portfolio increases, so too does the maintenance fee multiplier charged for all its patents, beginning with the second maintenance fee due date. All patents with common ownership interests would be aggregated in determining the fee enhancement. Because the enhanced fees do not kick in until 7.5 years after issuance, incentives to invent and to disseminate should not be significantly reduced. This proposal will encourage large patent portfolio holders to pare down their holdings by determining which of their older patents are not worth maintaining. This will benefit competitors and new inventors who are currently subject to hold-up problems from large portfolios — many of which are particularly caused by old, low-value patents held en masse.

[Read the article here: http://ssrn.com/abstract=2318521]. Olson’s approach is essentially a weak version of a “working requirement” seen in some countries that makes a patent unenforceable unless it is being used by the patentee. Instead of requiring working, Olson provides a monetary incentive.

Although Olson’s article is focused on the problem of “trolls,” his proposal would have its greatest impact on large technology companies such as IBM, Samsung, Intel, and others whose patent porfolios include large numbers of patents that are not being practiced. Those companies are already “suffering” from major increases in maintenance fees implemented by the USPTO earlier in 2013.

In my mind, the largest political roadblock to implementation is the increased burden placed on patent owners to actually understand the patents that they own. Because of the complexity and highly technical nature of modern patents and patent claims, it is rarely a trivial process for a patent owner to know whether its patents actually cover its processes in place. This is especially true because patents tend to be filed well before a commercial embodiment is on the market. Olson acknowledges this problem with the statement that a “possible objection is that this Article’s proposal will be expensive and burdensome for patent holders. . . . This burden and expense should not be understated. Accordingly, it may make sense to give a fairly long lead-in time to allow firms to comply. But it should also be noted that while this will be burdensome to patent owners, the current system with all of its uncertainty as to ownership and patent coverage is burdensome and costly to others.” Olson also writes that the patent owner is the “least cost avoider” in terms of determining whether the underlying invention is being practiced by the patentee. The problem with that argument is that, under the current system, nobody even needs to ask that question because it is irrelevant to patentability or patent enforcement (except as to remedies). Hopefully in a follow-on paper, Olson can provide us with a better mechanism for judging whether his proposal is better than the status quo or other alternatives. Setting this aside, Olson’s paper comes at an opportune time as Congress is currently drafting legislation and considering proposals to address the “problem of patent trolls.”

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What this will do is stop filings and stop the human advancement. NPE are being villianized but in reality they are the only place for corps to steal new ideas to infringe and without them all infringing will hault along with all human advancement. Far better to not charge the maintence fees unless the patent is making good money especially where the inventor is indegent then he might continue to produce if they straighten the rest of the system up.

Fly the “Licences of Right” idea (declare to the PTO you are willing to grant licences, thereafter pay annuities to the PTO at a 50% reduction) is a 2-edged sword. In the USA, it might result in even more in-force patents held by speculators.

Annuities represent a Decision Point every single year. Reaching a Decision is expensive. I think that might be why the USA has a renewal fee instead only every 3 1/2 years.

“about all the unfairness and “attacks” on the patent system from all sides”

LOL – your tirade of expletives came when I posted a piece from PatentDocs (nothing at all like “IP Witchhog” – even Friend(s of the Court would know that) to the effect of attacks from the Left and Right. And that was from more than one of the main writers there. Your reference to ‘patent apologist’ is thus more wrong spin from you.

Seems to be a quite unhealthy habit of yours.

How do you stand to be so wrong, so often? You really need to get into a different line of work.

That’s nice. Ray Zero has two patents that he says are “of interest” to you and he needs your answer in three weeks or he’ll see you in court. Jay Crackrust has five hundred patents and he says pretty much the same thing. You don’t know it yet but you suspect that each of these gentlemen has only “low value” patents. Which of the two would you rather see thrown in jail and divested of all property?

That’s a rhetorical question. The “held en masse” part is important, for reasons that everyone understsands but some are apparently loathe to admit. Good luck keeping those reasons a “secret” (hint: you can’t do it anymore).

Contrast that clean slate and the clean slate the Office faced when software first came out: Our founding fathers had the bal s to go full force forward. The modern day bureaucracy whined “we don’t have the art or the capability” LOL – you need to take another look and get your history right, 6.

“ready to hamper anyone”

LOL back to leaning on that canard, eh 6? Guess what: you are not hampering innovation when you hamper copiers. In case you missed the news bulletin, that is a GOOD thing, as that creates the necessity of more innovation.

“appears…initial fallacious reading…supposed”

LOL – your massive attempt at spin fails – you kind of missed the award for historical research there 6.

“So what if they did?”

LOL – your ‘logic’ is abysmal, 6. So you want to change a system that made us into the envy of the world, because you claim… ‘times change’? Perhaps you have heard of the phrase “don’t fix it if it is not broken” and as for “subject matter has been extended” sorry, but bzzzzt – wrong again.

”All we reasonable folks”

LOL – you are not included in any reasonable grouping of “reasonable folks.”

“I’m free to preach”

Sure you are 6, I just thought you might be interested in preaching effectively, seeing as how you currently preach only shows you to be the rather mindless lemming that you are. But please, if you want to continue to sux, have at it. I hope you don’t mind my continuing to have fun at your expense – you know, free country and all that.

”ease of actually doing the “inventing”… with the ease of obtaining a patent”

This proposal seems to discourage/disincentivize longer term revolutionary type inventions.

Oh boy somebody’s been drinking a lot of kool-aid.

Bring on the “revolutionary” inventions! We need more of those and making people pay higher maintenance fees on patents they aren’t practicing is going to “discourage” “revolutionary” inventions because … [waves hands furiously in the air]. There! See?

revolutionary invention portfolios need to be 10 or 100x larger, in-order to hope to get a revolutionary winner.

What does that have to do with “losing track” of what’s in your patent portfolio and how it relates to your products?

That’s a rhetorical question, Tr0 llb0y. You really need to find a rolling donut and make sweet love to it. I thnk probably doing that once a day is good therapy for you, otherwise you’re inclined to act like more of a major t 0 0 l than usual.

Tired Sckpuppet: I’ve seen this argument made many times. See the article entitled: THE CASE FOR TAILORING PATENT AWARDS BASED ON THE TIME-TO-MARKET OF INVENTIONS.

That sounds a very different argument from the one you attacked earlier. You spoke of “obsolete patents”. This is any argument about adjusting patent term to take into account the time to market a product.

If my gospel system is the sux, then surely people will never believe me and others of my preachin’ bros right?

That’s not how it works in Patent Jeebus world, 6. In Patent Jeebus world there is only One Truth: patents are the best thing ever and the more of them we have and the easier they are to get and enforce, the better off everybody will be. JUST TRUST PATENT JEEBUS ON THIS. Everyone who disagrees is a biased spreader of lies who just wants to copy stuff. Bow down!

Patent Jeebus comes from the mountaintop with yet more precious tablets! It’s not clear who is “condemning software” but someone must be doing it or Patent Jeebus wouldn’t be preaching about it. Stop condemning software, people!

Indeed, NWPA is free to check out at anytime. You are, too. Did you hear about this great blog where patent apologists can rant all day to their hearts content about all the unfairness and “attacks” on the patent system from all sides (except for the reasonable “center”, of course)? It’s called “IP Witchhog” or something like that. You should check it out. You’d like it there a lot, I think. There’s some really colorful characters there with a very similar “argumentative style” to your own. And every week they celebrate new j*nk being applied for and granted. You’d love it, really.

Annual renewals, with a more aggressive fee progression, as practiced elsewhere seem to me a better policy. The present system of three three payments seems to me an incentive to mindless hoarding, just in case. If you don’t actually have a real product line or a working business model that corresponds to your patent, you’d have to reflect every year as to why you’d want to sign that check.

Even a bi-annual fee would be an improvement.

Italy under Il Cavaliere tried to abolish its annual renewal fee, causing an uproar amongst EPC member states, as it could imperil the finances of the EPO and remove any incentive for weeding out unproductive patents.

India has a system where IP owners must file an annual declaration“>http://ipkitten.blogspot.ca/2013/07/licensing-amd-working-patents-in-india.html”>declaration on whether the invention is actually worked. But if you answer positively, does this actually mean that your business falls within the scope of claim 1? Who would check that?

Other countries have a two-tier renewal fee schedule. If you declare that you’re ready to grant a license then you’re entitled to a fee reduction. Presumably those who might prevail themselves of these dispositions are the ones who don’t actively work the invention.

And let’s be clear anon, when the founders first started up the patent system, they were dealing with a clean slate. They had no patents and very little knowledge and disclosure about the useful arts. They didn’t face a million in force exclusive rights ready to hamper anyone wanting to start actually making sht. There’s always a balance that need be struck between the two and the “more is better” simply doesn’t always pan out.

Meh Dudas’s article appears based on an initial fallacious reading of the supposed modern press on patents. Nobody who is for serious is saying that ever NPE is a troll, though many are willing to throw that tiny baby (the legit NPEs) out with the bathwater (thems trolls). And I don’t blame them, since the bathwater is foul and contaminated enough to kill or maim the rest of the household if not disposed of quickly.

“as it appears that making the patent property an alienable property was EXACTLY what the founding fathers intended.”

So what if they did? Times change. The law changes with them. Even the founders themselves may have second thoughts about allowing for the trollins if they saw the monstrosity it would become. Especially when considering the farce which patent eligible subject matter has been extended into being.

All we reasonable folks are saying is “reign in the excesses so that the public doesn’t demand the whole system be overhauled or even let go”. I know this is hard for you to understand, as an unreasonable mind bent on total patenting of the everythings. But that is just how it is brosef.

“‘preaching’ from how you want the system to be.”

I’m free to preach how I want to preach. Free country and all that. Why not just let me preach bro? If my gospel system is the sux, then surely people will never believe me and others of my preachin’ bros right?

“Furthermore, that same article points out what a FRAUD Malcolm is with his constant clamoring against software patents based on how ‘easy’ invention is for the software arts. It appears that making invention easy to obtain for the common man is something that our Founding Fathers built into the system.”

I think you just conflated the ease of actually doing the “inventing” (what MM is talking about) with the ease of obtaining a patent on the invention (what the founders were concerned with).

“Software should be revered rather than condemned.”

You literally have the balls to accuse me of preaching while you literally just used the phrase “revered” in relation to your pet position on an issue. AMAZING anon.

“Again, history points our that LOW fees were to be aimed for.”

History seems to point out that low fees were to be aimed for in relation to the category of the small guy. We still do that. Nowadays we have this thing called the corporation dominating the landscape, something the founders didn’t have to put up with quite as much.

Page 39 of the Paper addresses the criticism that this scheme will be heavy on the cost burden of patent portfolio owners. Olsen tells his readers not to underestimate this factor.

But then he writes that the proposal shifts the cost burden from those at risk of infringing to those that own the assertable rights.

I’m not sure how much of the cost burden is “shifting” and how much is additional burden. My hunch is that very little of the additional cost burden is shift and most of it is additional. The reason why Patent Offices outside the USA give incentives to those who register their ownership interest at the PTO is more to do with reducing the amount of patent litigation than with cost burden.

Court time is precious and so a patent system that is fit for purpose should husband that precious commodity, having it available for use in those dispute situations where nothing else will suffice.

Registrations of unused marks are “abandoned vessels in the shipping lanes of trade”. I am not convinced that one can fairly say that about any in force patents.

Germany has a steeply ascending patent annuity fee ladder. Cheap in the early years but ever-higher trowards the end of the 20 year patent term. What more than that does one need, to prompt patent owners to keep in force no longer than justified?

“I would assume the fees are calculated on a per-patent basis. It simplifies things“

Compare to at least “When evaluating an invention for the purpose of applying the public use bar under § 102(b), courts consider each claim of the patent individually.(FN 44)… Further, a patent application may only cover a single independent invention, however, using multiple claims can broaden the scope of that single invention” 4 J. Marshall Rev. Intell. Prop. L. 559 at 566.

Also keep in mind that infringement is brought on a per claim basis.

Clearly, any ‘use’ consideration could not merely focus on the patent singularly for simplicity sake.

You ought to take a look at the post at PatentDocs, penned in part by your former Mancrush Dudas.

First point is that it looks like Dudas has learned some stuff since he left the cushy puppet job he had at the Office.

Second point is that you are 100% wrong as to ‘capital hill has the bal to do’ insofar as it appears that making the patent property an alienable property was EXACTLY what the founding fathers intended.

If you ever want to leave your lemming amateur status behind and post with any sort of credibility, you need to get your facts in order and stop ‘preaching’ from how you want the system to be.

.- -.

Furthermore, that same article points out what a FRAUD Malcolm is with his constant clamoring against software patents based on how ‘easy’ invention is for the software arts. It appears that making invention easy to obtain for the common man is something that our Founding Fathers built into the system. Software should be revered rather than condemned.

Lastly, the whole notion of jacking fees also is something that should be critically panned. Again, history points our that LOW fees were to be aimed for.

And one the founding fathers would likely agree with – the patent property was deliberately meant to be alienable.

Rather than chucking it into the commons (with little or no fanfare), put it up for sale.

In the real estate analogy, a city would not raze a foreclosed property into a min-park, ‘dotting’ a community, nor open a repossessed house ‘for any and everyone.’ The asset would most likely be attempted to be turned around for what its intended purpose was.

I recall that Belgian economist conducted a study that – not surptisingly – showed that there is indeed some “elasticity” related to fees. I don’t know about the US, but in Europe fees typically are progressive (maintaining patents becomes more expensive per year).

If fees are unrelated to a service provided, they are actually a kind of tax, and should be set by the legislator. No taxation without representation!

In Europe there is some sort internal problem due to the fact that national patent offices (that still exist, in addition to the European Patent Office) are paid from the maintenance fees. Remeber that the “European patent” does not really exist: the EPO efefctively grants a bundle of national patents, e.i. patents having the same rights and obligations as national patents.

Good ideas Dennis! Here’s a complementary idea: in every other property scenario, when the owner defaults on “taxes” (maintenance fees here) the asset is subject to foreclosure by the governmental agency.

Why doesn’t the government do the same thing here? There are thousands of patents expiring every week that have “value” to someone – even if its not the original owner. If the government auctioned off even a fraction of the patents that were allowed to go expired, in exchange for $$ and payment of the maintenance fee, this just sounds like… an unexploited windfall. The asset still has potential value that is lost under the current scheme. Of course there would have to be safeguards and protections – i.e., the new owner must take subject to a license to the original owner and any of their licensees.

As long as you don’t go beyond the original grant term, I don’t see how this could offend… anyone. You’re simply allowing someone else to pay the tax, and potentially developing a lot of new revenue, ala unused spectrum auctions.

This proposal seems to discourage/disincentivize longer term revolutionary type inventions.

Revolutionary inventions (the initial breakthrough plus the needed supporting plurality of follow-on advancements) often take longer to happen. The far end of the patent term is more important.

The unknowns and failure rate of revolutionary invention is perhaps 10x or 100x+ higher (compared with incremental invention that is tied/linked/limited to near term production/profits/producers).

This means revolutionary invention portfolios need to be 10 or 100x larger, in-order to hope to get a revolutionary winner.
Near the beginning of those patent terms, the identity of that winner is unknown.

Excess focus on production/producers (the near term) seems like a mistake.

You obviously haven’t seen the PTO’s actual budget for the past year. When you see it then this conversation will come to a quick end with you acting like I’m being pedantic as you always do when you’re just plain ol wrong, usually due to your ignorance.

LOL part 1: the sequester DOES mean that the amount originally budgeted won’t be there. The amount originally there that served as the basis for the fee structure (that the Office was given the power to configure – but with the caveat of the LEGAL requirement that amount originally set by the budget had to balance in the agregate.

There is no ‘inferring’ necesssary.

LOL part 2: you work at the Office and don’t know that the budget numbers were posted? Do you even know what ‘budget’ means?

So the fees in the aggregate must balance the PTO’s budget, but because of the sequester you infer that the PTO necessarily should be lowering the fees because you also infer that their budget is cut? Or do you have the actual budget for the PTO somewhere?

Because I’m not 100% sure that the PTO is being hit quite as hard as you think they are by the sequester. For example, we had money to hold community day as usual, but we cancelled the normal community day and held a stu pid little community day lite because of people reporting on the PTO continuing to do just fine budget wise.

It was an assignment for you to complete, and while you claimed ignorance (oh how shocking), you did later indicate you knew the precise case that HELD that an inventor had NO duty to do ANYTHING with their invention (quite opposite your attempted spin here)

A simple alternative would be to impose a large, flat, fee, potentially bankrupting, maintenance fee for all, but forgive the fee entirely upon submission of any product commercially marked with the patent number as provided by statute.

Sorry, but the entire concept of ‘working the invention’ is a massive fa based on the fundamental nature of the patent right (the negative right to exclude) as well as the important ‘OR’ clause in 35 USC 101: or improvements thereof – perfectly valid patents can be held by people who simply have NO RIGHT to make the underlying item/process.

This plainly amounts to an arbitrary and capricious action against a particular class that targets perfectly legitimate rights.

1. We can mirror our working requirement to the one in that hotbed of innovation, India.

2. And better yet, more money goes to the government! As Howard Dean might say, “YeaaaAAAAAHHHHH!”

3. And to complete the trifecta, we will start a new cottage industry in a sweatshop in Bangladesh making token versions of patented items to bring to the US to sell to say we are working the invention.

Have any of you faced complying with a “working requirement” like say in Turkey. Any idea of the bureaucracy involved. Is this really what you want?

But I suppose (haven’t read beyond the Abstract of the 44 page Paper) it depends on who has the burden to prove working, and when that burden is experienced. If it is only when the owner asserts, then I suppose the scheme is eminently do-able.

Can you show everybody where this stated rationale for shortening patent term has been presented by anyone? You put the phrase in quotes but I’m not aware of anyone having said such a thing. Happy to be educated in that regard, however.

I’ve seen this argument made many times. See the article entitled: THE CASE FOR TAILORING PATENT AWARDS BASED ON THE TIME-TO-MARKET OF INVENTIONS.

I don’t see where the “whole lot of money” comes in.
You’ve got to have a patent attorney interpret the claim language and then apply it to a product. Pretty much a clearance opinion except you want to say that the product is covered. Like most things involving the USPTO, the cost of the attorneys will dwarf the cost of the USPTO fee.

You skipped the “held en masse” part. It’s sort of important.
Why? Low value means low value. Either the technology isn’t important (perhaps easily designed around) or it isn’t being infringed.

It’s a good point Turtle. It creates a whole problem of whether or not your claims actually cover a product you are selling. Probably will create opinions regarding the claims and products. It may create a desire for strange broad claims to make sure that you get one product. Who knows it may even make companies offer for sale products to cover patents.

We are on the same page again – with the possible exception that this was a cloaked tax that Congress was fully aware of (provisions to affirmatively deny the ability to use Inventor money for general tax concerns was on the table in the AIA).

For example, what happens if I am only practicing claim 1 but not claims 2-20? How is that going to be treated?

I would assume the fees are calculated on a per-patent basis. It simplifies things.

Also, for certain arts (e.g., software), it isn’t too hard to put together some rudimentary working example. Nothing you would sell a client.

Hmmm. Fascinating.

Who draws that line? Who enforces that line?

The line would be drawn by the legislators and enforced by the PTO and courts, most likely with the help of competitors who are keeping an eye on what is allegedly being practiced or not.

That is a whole lot of money spent just to get big companies to abandon “low-value patents.”

I don’t see where the “whole lot of money” comes in.

If the patents are “low-value,” why should they be holding anything up?

You skipped the “held en masse” part. It’s sort of important.

This reminds me of one of my favorite “rationales” for shortening patent term because ‘technology moves so fast, these patents become obsolete.’

Can you show everybody where this stated rationale for shortening patent term has been presented by anyone? You put the phrase in quotes but I’m not aware of anyone having said such a thing. Happy to be educated in that regard, however.

Given the uncertainty of claim construction, I don’t see how large or small companies would comply with any degree of certainty. Most companies completely lose track of how the claims ultimately turn out for products in development five years prior when the patent was filed. And what happens if you get it wrong? Are we going to put patent holders in a position to litigate with a third party whether their own products do/do not practice their own patents?

This is another tax hike, by a different name. Which is why government drones like it, and why it would be DOA if presented to Congress. Suggest sneaking it in the back door through the PTO’s fee-raising power and calling it “non-substantive”. You don’t really care how legitimately revenue is sucked out of the private sector, so long as it gets done, right?